Advantaged Brands
When a brand shows above average Economic Profit.
Advantaged Market
When a market shows above average or positive Economic Profit.
Base Case
The value of a business with its existing ownership and strategies before it is acquired.
Cadbury
Confectionery company.
Capital charge
A monetary amount, calculated by multiplying the money the business has tied up in capital, by the weighted average cost of capital (WACC). Capital charge is deducted from net operating profit after tax to arrive at Economic Profit.
CEO
Chief Executive Officer
Competitive Advantage
The benefit for consumers and/or customers which competitors may find difficult or uneconomic to replicate.
CSD
Carbonated Soft Drink.
Dairy Milk
Top chocolate bar.
Dividend cover
Underlying EPS divided by Dividend per ordinary share.
Dividend Yield (%)
The current percentage dividend yield based on the present cash dividend rate. It is calculated as the indicated annual dividend divided by the current price, multiplied by 100.
Economic Profit
Our objective is to maximise the value of Cadbury for our shareowners. An important financial tool that helps us measure value is economic profit. Traditional ways of measuring performance, such as operating profit after tax or earnings per share, do not take into account the full cost of the capital used to generate those profits. Capital is a combination of the funds provided by shareowners and money borrowed by Cadbury Schweppes, which we use to run the business and fund assets, such as property, office equipment, machinery and working capital. All capital has a cost which must be taken into account to calculate the economic profitability of our business. We only create value when we make a profit greater than the cost of capital invested. We define economic profit as: Operating Profit less Tax less a Capital Charge Where the capital charge is calculated by multiplying the money the business has tied up in capital by the weighted average cost of capital"WACC".
Ethical Trading
Our aims to ensure that conditions within mainstream production chains meet basic minimum standards and to eradicate the most exploitative forms of labour such as child and forced labour. Labelling criteria are generally based on core ILO conventions.
Free cash flow
Free cash flow is the amount of cash generated by the business after meeting all its obligations for interest, tax and dividends and after all capital investment, excluding share sales or purchases by the Employee Trust.
Functional confectionery
Refers to a market sector where the product serves a purpose such as cough sweets, sugar-free or chewing gum.
Gearing ratio
Net borrowings divided by Ordinary shareholders' funds plus Equity minority interests.
Interest cover
Total Operating profit including associates and excluding exceptional items divided by Net interest charge.
Managing for Value
The process which supports the achievement of our strategy. In 1997 we made our public commitment to this process and set clear financial objectives for 1997 through to 2000. These were: to grow earnings per share by at least 10% per annum; to generate at least £150 million of free cash flow; whilst accepting that it was not totally within our control, striving to double total shareowner return every four years. While our earnings per share and total shareowner return objectives remain the same for 2001-2005, we have increased the free cash flow target to £300 million per year.
NGO
Non-Government Organisation.
Operating asset turnover
Turnover divided by Average operating assets.
Operating profit
Excludes major restructuring costs, goodwill amortisation, operating profit on associates and exceptional items.
Pro Forma
A hypothetical balance sheet and income statement based on a set of assumptions. Pro forma statements are used in earnings reports.
ROIC
Stands for return on invested capital. ROIC is solely concerned with the ability to generate returns on money invested in a business; it has no interest in the source of those funds. ROIC is calculated as follows: After-tax operating earnings / (Total assets - cash and non-interest-bearing current liabilities).
Still Drink
A soft drink containing no carbonation.
Sugar confectionery
Refers to any non-chocolate confectionery that has a high sugar content but is non-functional.
Total Shareowner Return (TSR)
The increase in the share price over a given period - measured as the average daily share price - plus the dividend income which is assumed to have been re-instated at the dates of payment to buy additional shares. It is a combination of the average cost of borrowing and the cost of shareholder's funds.
Trading margin
Operating profit divided by Turnover.
Turnover
Restated to comply with the new definition of net sales adopted by the Group in 2002 for the years 2000 and 2001.
Underlying Earnings Per Share
Profit for the financial year (excluding major restructuring costs, goodwill amortisation, exceptional items, disposal gains and losses) divided by weighted average number of ordinary shares in issue.
Value-based Management (VBM)
A simple but powerful management concept that helps companies deliver better financial performance by systematically managing value creation. VBM has two main Elements. Principles: VBM is based on a framework for making decisions and managing performance that can be applied at all levels in a company. The framework allows companies to develop strategies, allocate resources, set performance target and reward managers in a way that improves the company's ability to maximise shareholder value. The framework ensures management implements the best alternatives for any business strategy or organisational issue. Processes: VBM also offers a set of tools and processes to enable managers at all levels to contribute to shareholder value goals through their everyday behaviour, decisions and actions. These techniques are vital to create competitive advantage and wealth at all levels of a company.
Weighted average cost of capital (WACC)
The cost of financing our operations and represents the average cost of debt and equity funding weighted by the proportion of the company's capital structure that those two components constitute.